Divers and Diving supervisors working in the inland inshore sectors who have their income from diving trading activities assessed for Income Tax purposes as the carrying on of a trade in the United Kingdom, by virtue of Chapter 3 of the Finance Act 2004 and the Income Tax (Construction Industry Scheme) Regulations 2005.

This concession allows divers and diving supervisors to offset against their income those expenses which are ‘wholly and exclusively’ for the purpose of the trade. 

The Law regarding Training Courses

Training courses are not deemed allowable for tax relief as expenditure by the proprietor of a business which gives him new expertise, knowledge or skills, as per “Humbles v. Brooks (1962) 40 TC 500”, and HMRC Expenditure on training courses BIM 35660 www.hmrc.gov.uk/manuals/bimmanual/BIM35660.htm

While no tax relief for expenditure is allowable on those initial vocational or educational training courses which provide new expertise, knowledge or skills. If the diver or diving supervisor is required to attend training (refresher training) to update any expertise etc, which the proprietor (diver and diving supervisor) already possess, as per “Humbles v. Brooks (1962) 40 TC 500”, the expenditure is allowable and is normally regarded as ‘revenue expenditure’ and will be deductible if it satisfies the ‘wholly and exclusively’ for the purposes of the trade. The entire cost (100%) is allowable as a revenue expense in the fiscal year, in which the refresher training is undertaken.

The following examples of refresher training will be allowable as a revenue expense.

1. CSWIP Phase 7 schemes, 3.1U and 3.2U
2. Other underwater inspection schemes such as Lloyds Diver Inspector
3. Specialist NDT training for Underwater use. i.e. Ultrasonic or radiography
4. Welder refresher training
5. Health and Safety at Work First Aid
6. IMCA Diver Medic
7. Any Safety related training courses that requires refresher training

Divers and Diving Supervisors who for tax purposes are working in the UK and who are employed under PAYE will be subject to those earnings under Part 2 of ‘Income Tax (Earnings and Pensions) Act 2003’ (ITEPA 2003) as an employee, irrespective of whether they are employed by a UK company and subject to PAYE or receive the income gross or net of local income or employment tax from an overseas employer and shall not be allowed to offset the cost of any initial or refresher training against their taxable income. Section 336(1) of the Income Tax (Earnings and Pensions) Act 2003 prohibits offsetting the cost of any initial or refresher training, as the expense has to be incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

A number of recent cases “HMRC v Decadt, (2007)BTC 586”, “Perrin v HMRC, (2008) Sp C 671” and “Consultant Psychiatrist v HMRC (2006) Sp C 557” have confirmed the difficulties, in particular, the training (while an obligation on the employee) has generally been considered to be undertaken in addition to (rather than as part of) the principal duties of the employment.

Divers and Diving supervisors working in the exploitation and exploration of minerals (oil and gas) in the UK territorial and continental shelf waters, have their income from employment, which would otherwise be chargeable to tax under Part 2 of ‘Income Tax (Earnings and Pensions) Act 2003’ (ITEPA 2003), exempt under Section 6(5) of ITEPA 2003 and assessed for Income Tax purposes as the carrying on of a trade in the United Kingdom, by virtue of Section 15 of the ‘Income Tax (Trading and Other Income) Act 2005’, IT(TAOI)A 2005.

Section 15 IT(TAOI)A 2005 excludes any other commercial diving activities not in the exploitation and exploration of minerals, such as diving activities specifically related to inland or inshore work, or any other offshore diving work such as salvage or working on renewable energy sources and carbon capture.

This concession allows divers and diving supervisors to offset against their income from exploration and exploitation activities in the UK only, those expenses which are ‘wholly and exclusively’ for the purpose of the trade.

In addition ‘Section 16 of  IT(TAOI)A 2005’ applies where a person (diver and diving supervisor) carries on any oil-related activities as part of a trade, those activities are treated for income tax purposes as a separate trade, distinct from all other activities carried on by the person as part of the trade.

This means the income of a diver and diving supervisors in oil and gas related work cannot be counted as part of any other diving trading activities, profits or income such as an inland inshore self employed sub-contractor diver.

The Law regarding Training Courses

Training courses would not normally be deemed allowable as tax relief for expenditure by the proprietor of a business which gives him new expertise, knowledge or skills, as per “Humbles v. Brooks (1962) 40 TC 500”, and HMRC Expenditure on training courses BIM 35660. www.hmrc.gov.uk/manuals/bimmanual/BIM35660.htm

Where the income of a Diver and Diving Supervisor is derived from UK exploration and exploitation diving activities, they can claim Capital Allowances by virtue of section ‘20(1) of the Capital Allowances Act 2001’ as their income from employment is taxed as a trade.

This allows the Diver and Diving Supervisor to claim a deductible cost against the profits of a trade, for those training courses which are a mandatory requirement under UK law or an industrial requirement by the company or client, when those training courses come within the meaning of ‘Know How’ in ‘Section 452 (1) (b) of the Capital Allowances Act 2001’, which applies to any industrial information or techniques likely to assist in working a source of mineral deposits.

The following examples are a list of training which will meet the statute requirements of industrial information or techniques likely to assist in working a source of mineral deposits, within the meaning of ‘Know How’ in ‘Section 452 (1) (b) of the Capital Allowances Act 2001’, providing these are ‘wholly and exclusively’ for the purpose of the trade.

1. HSE Surface Supplied Diving Course with Offshore Top Up or equivalent (note * 1)
2. Saturation Bell Diving course
3. IMCA Tools module
4. CSWIP Phase 7 schemes, 3.1U and 3.2U
5. Other underwater inspection schemes such as Lloyds Diver Inspector
6. Specialist NDT training for Underwater use. i.e. Ultrasonic or Radiography
7. Welder training in wet welding techniques
8. Subsea rigging and lifting
9. Underwater Explosives

*1 The cost of the ‘HSE SCUBA’ and ‘HSE surface supplied’ or equivalent alone will not qualify, as the diver cannot work offshore in the UK with such qualifications, only inland inshore work. But if these courses were completed prior to undertaking the Offshore Top Up, the costs can be offset at a later date when the diver is engaged in UK exploration and exploitation diving activities.

The following examples are a list of training courses which DO NOT qualify under ‘Know How’ in ‘Section 452 (1) (b) of the Capital Allowances Act 2001’and NO tax relief is allowable on the initial training expenditure cost.

1. Health and Safety First Aid at Work
2. IMCA Diver Medic
3. IMCA Air or Bell Supervisory training
4. IMCA ALST
5. IMCA Diving technicians training
6. OPITO Offshore Survival and Fire-fighting
7. OPITO MIST Training
8. Any Safety related training courses

While no tax relief for expenditure is allowable on those training courses which do not meet the ‘Know How’ criteria, when the diver or diving supervisor is engaged in UK exploration and exploitation diving activities.

If the diver or diving supervisor is required to attend training (refresher training) to update any expertise etc, which the proprietor (diver and diving supervisor) already possess, as per “Humbles v. Brooks (1962) 40 TC 500”, the expenditure is allowable and is normally regarded as ‘revenue expenditure’ and will be deductible if it satisfies the ‘wholly and exclusively’ for the purposes of the trade.

The following examples of refresher training will be allowable as a revenue expense.

1. CSWIP Phase 7 schemes, 3.1U and 3.2U
2. Other underwater inspection schemes such as Lloyds Diver Inspector
3. Specialist NDT training for Underwater use. i.e. Ultrasonic or radiography
4. Welder training in wet welding techniques
5. Health and Safety at Work First Aid
6. IMCA Diver Medic
7. OPITO Offshore Survival and Fire-fighting
8. OPITO MIST Training
9. Any Safety related training courses that requires refresher training

UK resident Divers and Diving Supervisors working outside the UK

Divers and Diving Supervisors who are resident for tax purposes in the UK and who are engaged outside the UK, which will include the North Sea Sectors of Holland, Denmark, Germany and Norway, will be subject to those earnings under Part 2 of ‘Income Tax (Earnings and Pensions) Act 2003’ (ITEPA 2003) as an employee, irrespective of whether they are employed by a UK company and subject to PAYE or receive the income gross or net of local income or employment tax from an overseas employer and shall not be allowed to offset the cost of any initial or refresher training against their taxable income.

Section 336(1) of the Income Tax (Earnings and Pensions) Act 2003 prohibits offsetting the cost of any initial or refresher training, as the expense has to be incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

A number of recent cases “HMRC v Decadt, (2007)BTC 586”, “Perrin v HMRC, (2008) Sp C 671” and “Consultant Psychiatrist v HMRC (2006) Sp C 557” have confirmed the difficulties, in particular, the training (while an obligation on the employee) has generally been considered to be undertaken in addition to (rather than as part of) the principal duties of the employment.

The Amounts Claimable by the Diver and Diving Supervisor

The amount divers and diving supervisors engaged in exploration and exploitation activities on the UK continental shelf only, can offset against their trading income for training courses that are ‘wholly and exclusively’ for the purposes of the trade will depend on whether the training course is an initial course or a refresher training course. 

1) For the initial courses undertaken within the meaning of ‘Know How’ in ‘Section 452 (1) (b) of the Capital Allowances Act 2001’. The actual percentage of the initial cost (original course fee) will be determined by what is allowable in ‘Capital Allowances’ within the current finance act and will vary from year to year depending on what is in the chancellors budget. Any cost remaining from the percentage deducted from the initial cost in the first year of the claim, is written down over the remaining years that the diver or diving supervisor continues to work in the UK sector of the North Sea. No actual percentage figures are provided in this document for the reason that the percentage figures for the first year claim, the subsequent years writing down allowances of the remaining cost and cessation allowances if any capital cost remains, will vary from year to year and individual divers and diving supervisors should seek advice from a certified accountant or their local HMRC office on the exact percentage of the cost they can claim annually as a ‘Capital Allowance’.

2) For the refresher courses undertaken, the entire cost (100%) is allowable as a revenue expense in the fiscal year, in which the refresher training is undertaken.

Enough Is Enough 9 – November 2009 Edition

OILC is pleased to announce the release of EiE9, the ninth edition of the branch bulletin.

You can download the PDF version here.

You can read and comment on the online version here.

Please feel free to download and distribute the PDF amongst your work colleagues. You can also add your comments to any letter via the online addition.

www.nokernok.com

If you are thinking of making a few quid on the side commercially selling scallops, BEWARE.

The HSE successfully prosecuted scallop diver Anthony Wightman of Devon for continuing to dive commercially for scallops without the presence of a standby diver and so contravened the terms of the Prohibition Notice (PN) issued on 15.01.07.

On the 8/7/09 he was given a ‘Conditional Discharge under HASAWA 1974 s33’ for a contravention of a PN.

Whilst he was not fined the HSE were awarded £150 costs and if he continues to dive in contravention of the PN he may well end up doing time at Her Majesty’s pleasure.

For the ACoP regarding Scallop diving see www.hse.gov.uk/hid/osd/scallop.pdf

In yet another court decision, this time the Court of Appeal in the case Autoclenz Ltd v Belcher and Others, has overturned the efforts by some employers to turn employees into self-employed subcontractors by artificially “window-dressing” the contract.

The judgement, given on 13 October 2009, restored the original employment tribunal decision that Mr. Belcher and other car valeters were employees of Autoclenz, despite the contract being carefully worded to describe them as subcontractors.  Each of the three Appeal Court judges provided their individual reasoning on the issues but they were all in agreement.

It is worth restating the long-established requirements for the existence of a contract of employment, otherwise known as a “contract of service”:

“A contract of service exists if these three conditions are fulfilled.

(i) the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.

(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.

(iii) The other provisions of the contract are consistent with its being a contract of service”.

The basis for Appeal Court judges’ decision is well summed up by the comments of Lord Justice Sedley:

“Employment [Tribunal] judges have a good knowledge of the world of work and a sense, derived from experience, of what is real there and what is window-dressing.  The conclusion that Autoclenz’s valeters were employees in all but name was a perfectly tenable one on the evidence which the judge had before him.  The elaborate protestations in the contractual documents that the men were self-employed were odd in themselves and, when examined, bore no practical relation to the reality of the relationship.

The contracts began by spelling out that each worker was required to ‘perform the services which he agrees to carry out for Autoclenz, within a reasonable time and in a good and workmanlike manner’ – an obligation entirely consistent with employment.  Notwithstanding the repeated interpolation of the word “sub-contractor” and the introduction of terms inconsistent with employment which, as the judge found, were unreal, there was ample evidence on which the judge could find, as he did, that this was in truth an employment relationship.”

As to whether the employment contract in this particular could be described as a “sham”, as the Employment Tribunal judge had suggested, Lady Justice Smith commented on contracts that make specific provision for a worker to send a substitute (in order to remove any requirement that the work be performed personally by the worker) or to refuse any work offered (in order to remove the mutuality of obligation that exists in the employment relationship).  In the case Consistent Group Ltd v Kalwak, the Employment Appeal Tribunal judge, Mr. Justice Elias, in describing “sham” contracts, made this balanced statement:

“In other words, if the reality of the situation is that no one seriously expects that a worker will seek to provide a substitute, or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship. But if these clauses genuinely reflect what might realistically be expected to occur, the fact that the rights conferred have not in fact been exercised will not render the right meaningless.”

However, in this case, Lady Justice Smith said that “the [Employment Tribunal judge] was following Elias P’s approach to the question of whether the written agreement between Autoclenz and the valeters described the true nature of the relationship between them. He was satisfied that it did not.”

For the case notes see; www.bailii.org/ew/cases/EWCA/Civ/2009/1046.html

Basically all those working in the Inland Inshore diving sectors are employees with full rights under various UK employment legislation, irrespective of what the diving contractors will tell you.

Fiscal legislation is different and whilst the arguments of whether a divers or other working for an Inland Inshore diving contractor can be subject to self employed tax are debateable, any argument that fiscal law denies the rights of divers etc working in the inland Inshore sectors all rights under H&S law and various employment law have been further vindicated by the above case.

From 1^st November 2009 to 28^th February 2010, a ban on Scallop fishing including diving comes into force throughout Wales.

www.statutelaw.gov.uk/legResults.aspx?&PageNumber=1&NavFrom=3&activeTextDocId=3627824

The ODIA from November 1^st has been signed off by all parties to the agreement and is now official.

The employers have set up a web site www.odia.org.uk about the ODIA with downloadable copies of the agreement in full except the pay rates which will only be sent to Employer signatories and RMT members. RMT members will also receive a copy of the ODIA in plain English from me which makes the document easier reading and more easily understood

Pay Rates are published below.

Don’t forget there is now a dedicated forum for RMT/OILC members to discuss issues union at www.nokernok.com All it requires is your membership number to sign in and wait for a verification email.

We’re getting there lads.

The HSE have finally published the UK Diving ACoPs on line free of charge for those who want downloadable copies.

For a PDF file of the UK offshore diving ACoP

see www.hse.gov.uk/pubns/priced/l103.pdf

For a PDF file of the UK Inland Inshore diving ACoP

see www.hse.gov.uk/pubns/priced/l104.pdf

This letter is from the union UNITE regarding their negotiations for better pay and conditions for its members under the OCA/UKDCA offshore agreement.

OFFSHORE UPDATE

6 October 2009
OCA/UKDCA

Following the failure of the employers to make an offer on pay this year, we consulted our members by holding meetings in Aberdeen and Glasgow, and by way of a consultative ballot over the possibility of taking industrial action to pursue the claim.

We will concentrate our efforts, over the coming months, in strengthening the union, by recruiting more members and representatives. A strong and vibrant union, with active members, are the best means of achieving better pay and conditions.

That is what apathy gets you and the members have no right to complain and they have been offered 0%

During my illness I have had the misfortune of dealing with a number of government departments notably the DSS and the DWP.

Each time I am asked if I would like to continue the conversation in English.

On all occasions I say NO and when asked what language I’d like, I replied SCOUSE. Believe it or not two actually said that is not listed I‘ll see if there is a Scouse interpreter available.

WTF is going on.

Anyway here is what should be on all answering services

‘GOOD MORNING, WELCOME TO THE UNITED KINGDOM ‘ 

‘Press ‘1′ if you speak English.’ 

‘Press ”2” to disconnect until you can